You had never had fantasies of becoming a mer yourself, just of being with one. But Lydia clearly had some fantasies of her own she hadn't shared and since you had control over the change you were curious to experience the transformation into a merman.
Feeling the sensation of becoming a mer for the first time you realize why Lydia enjoys it so much. You twist in the water to catch sight of the transformation. The material of your blue swim trunks wraps its way down to your feet, drawing your legs into a sleek blue tail. It's quite exhilirating.
You see Lydia swim by with her beautiful silver tail. Between the sight of Lydia as a mermaid and the sensation of transforming, you are very turned on. You swim after Lydia, moving a little awkwardly in your new tail. You suspect being a mermaid came easier to Lydia since she was a much better swimmer than you. In a home pool, the limited space means you are able to catch her - not that she was making too serious an effort to escape you. The two of you share your first underwater kiss.
The sensation in your groin is now very strong, but it also feels strange somehow. Your chest also feels strange. As you and Lydia kiss, you pull each other close. The feeling of her breasts against you also feels strange, almost as if...
With a startled thought, you break the kiss and look down your body. Sure enough, you have breasts of your own! A quick check of your groin also reveals why the sensation in your groin feels different than usual. You kick off to the surface and gasp for air.
You recall the wording of the wishes you and Lydia made with the genie and quickly find what you believe is the cause of your current situation: Lydia wished "for my boyfriend to possess those same transformation abilities as applied to himself." Your wish specifically refered to her becoming a mermaid; her wish didn't say anything about you becoming a merman. At least you have control over changing back...right?
A moment later, Lydia surfaces in front of you.
"I've turned into a mermaid!"